Hertz announced that it will invest some of the proceeds from selling its Tesla vehicles back into internal combustion engine vehicles.
Back in 2021, Hertz announced an important effort to electrify its fleet of rental cars, led by a massive purchase of 100,000 Tesla Model 3 vehicles. More recently, the company added Model Y vehicles to the order.
The rental company’s Tesla fleet has been growing over the last few years, and it reported that Tesla vehicles are increasing Hertz’s customer satisfaction.
Yesterday, we reported on Hertz starting to sell its older Tesla Model 3s and they are going for fairly cheap.
It was believed that Hertz would continue electrifying its fleet with more EVs, but the company is now announcing a change in its electrification effort.
Today, Hertz confirmed in a new SEC filing that it is selling about 20,000 electric vehicles, but it also added that it plans to use some of the proceeds from those EV sales to buy new gas-powered vehicles:
Hertz Global Holdings, Inc. (the “Company” or “Hertz”) has made the strategic decision to sell approximately 20,000 electric vehicles (“EVs”) from its U.S. fleet, or about one-third of the global EV fleet. These vehicle dispositions, which were initiated in December 2023 and are expected to take place in an orderly fashion over the course of 2024, will cover multiple makes and models.EVs held for sale will remain eligible for rental within the Company’s fleet during the sales process. The Company expects to reinvest a portion of the proceeds from the sale of EVs into the purchase of internal combustion engine (“ICE”) vehicles to meet customer demand.
Hertz had bad timing with its EV purchase. It started buying its fleet of Tesla vehicles at peak prices right before the automaker started to slash prices in order to create demand amid increasing interest rates.
It resulted in the value of Hertz’s Tesla fleet crashing.
Now, the company is expected to recognize “approximately $245 million of incremental net depreciation expense” related to the sale of its electric vehicles.
Hertz argued that it will continue its EV strategy despite this setback:
The Company expects this action to better balance supply against expected demand of EVs. This will position the Company to eliminate a disproportionate number of lower margin rentals and reduce damage expense associated with EVs. The Company will continue to execute its strategy around EV mobility and offer customers a wide selection of vehicles. The Company continues to implement a series of initiatives that it anticipates will continue to improve the profitability of the remaining EV fleet. These initiatives include the expansion of EV charging infrastructure, growing relationships with EV manufacturers, particularly related to more affordable access to parts and labor, and continued implementation of policies and educational tools to help enhance the EV experience for customers. Going forward, the Company will continue to actively manage the total size of its EV fleet, as well as the allocation of EVs among customer segments, including leisure, corporate, government and rideshare.
The company says that the 20,000 EVs it is selling are from several automakers, but so far, it mainly has Tesla vehicles on its website.
Obviously, Hertz had really bad timing with its Tesla purchase, and now it is paying the price.
However, I think it’s short-sighted to reinvest in ICE vehicles. I think they will lose a lot of value too in the next 2 years as the world increasingly moves to electric vehicles.
My bet is that they would likely be better off buying EVs again.
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